Question 1

Reference: Ref 5-2 (Figure: Slave Redemption) Refer to the figure. When slave redeemers enter the market, the number of slaves remaining in captivity is:

Accepted Answer

A)  100. 
B)  400. 
C)  500. 
D)  1,100 
A)  100. 
B)  400. 
C)  500. 
D)  1,100

Question 2

If the cross-price elasticity of demand of two goods is negative, we can conclude that the two goods are:

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  normal goods. 
D)  inferior goods. 
A)  substitutes. 
B)  complements. 
C)  normal goods. 
D)  inferior goods.

Question 3

At a price $4 for Good X, a firm is willing to supply 1,400 units of X. For a price of $5 for Good X, the firm is willing to supply 1,500 units X. The change in revenue for the firm when the price of the good rises from $4 to $5 is a:

Accepted Answer

A)  $100 increase in total revenue. 
B)  $1,500 increase in total revenue. 
C)  $7,500 increase in total revenue. 
D)  There is not enough information to answer the question. 
A)  $100 increase in total revenue. 
B)  $1,500 increase in total revenue. 
C)  $7,500 increase in total revenue. 
D)  There is not enough information to answer the question.

Question 4

If the price elasticity of demand is 0.5, then when the price of Good X rises by 20 percent:

Accepted Answer

A)  the quantity demanded of Good X rises by 40 percent. 
B)  the quantity demanded of Good X rises by 10 percent. 
C)  the quantity demanded of Good X falls by 10 percent. 
D)  the quantity demanded of Good X falls by 40 percent. 
A)  the quantity demanded of Good X rises by 40 percent. 
B)  the quantity demanded of Good X rises by 10 percent. 
C)  the quantity demanded of Good X falls by 10 percent. 
D)  the quantity demanded of Good X falls by 40 percent.

Question 5

Accepted Answer

A)  elastic since quantity supplied increases more with an increase in price. 
B)  elastic since quantity supplied increases less with an increase in price. 
C)  inelastic since quantity supplied increases more with an increase in price. 
D)  inelastic since quantity supplied increases less with an increase in price. 
A)  elastic since quantity supplied increases more with an increase in price. 
B)  elastic since quantity supplied increases less with an increase in price. 
C)  inelastic since quantity supplied increases more with an increase in price. 
D)  inelastic since quantity supplied increases less with an increase in price.

Question 6

Since the demand for illegal drugs is quite inelastic, an increase in the price of illegal drugs:

Accepted Answer

A)  increases seller revenues. 
B)  decreases seller revenues. 
C)  does not affect seller revenues. 
D)  The change in revenue depends on supply elasticity. 
A)  increases seller revenues. 
B)  decreases seller revenues. 
C)  does not affect seller revenues. 
D)  The change in revenue depends on supply elasticity.

Question 7

Suppose that large oil reserves are discovered off the coast of Cuba, and these reserves will increase the world's supply of oil by 2.5 percent. If the elasticity of demand and supply of oil are 0.50 and 0.40, respectively, what happens to the price of oil?

Accepted Answer

A)  It falls by 2.5 percent. 
B)  It falls by 25 percent. 
C)  It falls by 2.78 percent. 
D)  It falls by 36 percent. 
A)  It falls by 2.5 percent. 
B)  It falls by 25 percent. 
C)  It falls by 2.78 percent. 
D)  It falls by 36 percent.

Question 8

(Figure: Slave Redemption with Perfectly Elastic Supply) Refer to the figure. Suppose the supply curve is perfectly elastic as it is in the graph, a rise in the demand for slaves (from D1 to D2) causes: Figure: Slave Redemption with Perfectly Elastic Supply

Accepted Answer

A)  the number of people in slavery to remain at 500 after the redemption program. 
B)  the price of slaves to remain unchanged. 
C)  400 additional people to enter slavery temporarily before they are released. 
D)  All of the answers are correct. 
A)  the number of people in slavery to remain at 500 after the redemption program. 
B)  the price of slaves to remain unchanged. 
C)  400 additional people to enter slavery temporarily before they are released. 
D)  All of the answers are correct.

Question 9

Figure: Slave Redemption   Reference: Ref 5-2 (Figure: Slave Redemption) Refer to the figure. When slave redeemers enter the market, the total number of freed slaves is ________ and the net number of freed slaves is ________.

Accepted Answer

A)  1,500; 500 
B)  1,000; 400 
C)  1,100; 100 
D)  500; 1,000 
A)  1,500; 500 
B)  1,000; 400 
C)  1,100; 100 
D)  500; 1,000

Question 10

Demand for necessities is elastic, while demand for luxuries is inelastic.

Accepted Answer

A) True 
 B)False

Question 11

The flatter the demand curve, the less is the elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 12

Figure: Slave Redemption and Elasticity   Reference: Ref 5-3 (Figure: Slave Redemption and Elasticity) Refer to the figure. How many slaves are freed after the redemption program?

Accepted Answer

A)  1,000 
B)  400 
C)  600 
D)  1,400 
A)  1,000 
B)  400 
C)  600 
D)  1,400

Question 13

The demand curve for Froot Loops breakfast cereal is very elastic because:

Accepted Answer

A)  most breakfast cereals are considered a luxury good. 
B)  there are many good substitutes for Froot Loops. 
C)  the demand curve is negatively sloped. 
D)  it is one of the most advertised cereals in the world. 
A)  most breakfast cereals are considered a luxury good. 
B)  there are many good substitutes for Froot Loops. 
C)  the demand curve is negatively sloped. 
D)  it is one of the most advertised cereals in the world.

Question 14

Good X and Good Y are related goods. When the price of Good X rises by 5 percent, the quantity demanded for Good Y rises by 15 percent. Calculate the cross-price elasticity.

Accepted Answer

A)  3 
B)  -3 
C)  -0.3 
D)  0.3 
A)  3 
B)  -3 
C)  -0.3 
D)  0.3

Question 15

When the supply curve of slaves is perfectly ________, every slave bought by the redeemers results in/is ________ held in captivity.

Accepted Answer

A)  inelastic; more slaves 
B)  inelastic; one less slave 
C)  inelastic; redeemed at a lower price than expected 
D)  elastic; redeemed at a higher price than expected 
A)  inelastic; more slaves 
B)  inelastic; one less slave 
C)  inelastic; redeemed at a lower price than expected 
D)  elastic; redeemed at a higher price than expected

Question 16

Since roughly 1950 total revenues in the farming sector have ________, and since 1980 total revenues in computer chips have ________.

Accepted Answer

A)  increased; decreased 
B)  decreased; decreased 
C)  increased; increased 
D)  decreased; increased 
A)  increased; decreased 
B)  decreased; decreased 
C)  increased; increased 
D)  decreased; increased

Question 17

Accepted Answer

a. 2/(1.5) = 1.33% r

Question 18

Reference: Ref 5-2 (Figure: Slave Redemption) Refer to the figure. When slave redeemers enter the market, the price of slaves:

Accepted Answer

A)  increases to $40. 
B)  decreases to $17. 
C)  stays unchanged at $40. 
D)  exceeds $40. 
A)  increases to $40. 
B)  decreases to $17. 
C)  stays unchanged at $40. 
D)  exceeds $40.

Question 19

A 4 percent increase in the price of beer will cause a 1 percent decline in the quantity of beer demanded. The demand for beer is:

Accepted Answer

A)  elastic. 
B)  unitary elastic. 
C)  inelastic. 
D)  elastic at 4 (in absolute value). 
A)  elastic. 
B)  unitary elastic. 
C)  inelastic. 
D)  elastic at 4 (in absolute value).

Question 20

Total revenue is:

Accepted Answer

A)  price X quantity. 
B)  quantity/price. 
C)  the elasticity of demand X price. 
D)  price + quantity. 
A)  price X quantity. 
B)  quantity/price. 
C)  the elasticity of demand X price. 
D)  price + quantity.

Exam 5: Elasticity and Its Applications

Reference: Ref 5-2 (Figure: Slave Redemption) Refer to the figure. When slave redeemers enter the market, the number of slaves remaining in captivity is:

If the cross-price elasticity of demand of two goods is negative, we can conclude that the two goods are:

At a price $4 for Good X, a firm is willing to supply 1,400 units of X. For a price of $5 for Good X, the firm is willing to supply 1,500 units X. The change in revenue for the firm when the price of the good rises from $4 to $5 is a:

If the price elasticity of demand is 0.5, then when the price of Good X rises by 20 percent:

Since the demand for illegal drugs is quite inelastic, an increase in the price of illegal drugs:

Suppose that large oil reserves are discovered off the coast of Cuba, and these reserves will increase the world's supply of oil by 2.5 percent. If the elasticity of demand and supply of oil are 0.50 and 0.40, respectively, what happens to the price of oil?

(Figure: Slave Redemption with Perfectly Elastic Supply) Refer to the figure. Suppose the supply curve is perfectly elastic as it is in the graph, a rise in the demand for slaves (from D1 to D2) causes: Figure: Slave Redemption with Perfectly Elastic Supply

Figure: Slave Redemption Reference: Ref 5-2 (Figure: Slave Redemption) Refer to the figure. When slave redeemers enter the market, the total number of freed slaves is ________ and the net number of freed slaves is ________.

Demand for necessities is elastic, while demand for luxuries is inelastic.

The flatter the demand curve, the less is the elasticity of demand.

Figure: Slave Redemption and Elasticity Reference: Ref 5-3 (Figure: Slave Redemption and Elasticity) Refer to the figure. How many slaves are freed after the redemption program?

The demand curve for Froot Loops breakfast cereal is very elastic because:

Good X and Good Y are related goods. When the price of Good X rises by 5 percent, the quantity demanded for Good Y rises by 15 percent. Calculate the cross-price elasticity.

When the supply curve of slaves is perfectly ________, every slave bought by the redeemers results in/is ________ held in captivity.

Since roughly 1950 total revenues in the farming sector have ________, and since 1980 total revenues in computer chips have ________.

Reference: Ref 5-2 (Figure: Slave Redemption) Refer to the figure. When slave redeemers enter the market, the price of slaves:

A 4 percent increase in the price of beer will cause a 1 percent decline in the quantity of beer demanded. The demand for beer is:

Total revenue is:

The Big Ideas in Economics

The Power of Trade and Comparative Advantage

Business Fluctuations: Aggregate Demand and Supply

Equilibrium: How Supply and Demand Determine Prices

Taxes and Subsidies

The Price System: Signals, Speculation, and Prediction

Price Ceilings and Floors

International Trade

Externalities: When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination and Pricing Strategy

Oligopoly and Game Theory

Competing for Monopoly: the Economics of Network Goods

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Asymmetric Information: Moral Hazard and Adverse Selection

Consumer Choice

Gdp and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation, and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Supply and Demand

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Filters

Figure: Slave Redemption Reference: Ref 5-2 (Figure: Slave Redemption) Refer to the figure. When slave redeemers enter the market, the total number of freed slaves is and the net number of freed slaves is .

When the supply curve of slaves is perfectly , every slave bought by the redeemers results in/is held in captivity.

Since roughly 1950 total revenues in the farming sector have , and since 1980 total revenues in computer chips have .